Cipla - Proventil approval, well ahead of time - HDFC Securities

Validates Inhalation capability- Cipla received approval for gProventil HFA (Albuterol Sulfate), its first MDI (metered dose inhaler) approval in the US. This is the first generic approved by the US FDA for Proventil HFA. The approval comes ahead of time (was expected in 2HFY21) as FDA recognizes the rising demand for albuterol products during coronavirus pandemic.

About albuterol opportunity- The albuterol category has three brands - Proventil HFA, Ventolin and ProAir HFA and all the three brands have an authorised generic (AG). Additionally, ProAir also has a generic player (Perrigo). ~40-50% of prescriptions have already moved to generics. Cipla's product will compete with these 4 generics (3 AGs and Perrigo)and brands in the albuterol space. Albuterol Sulphate had a market size of USD 2.8bn as per IQVIA Feb '20. At the manufacturer's level the market is ~USD 0.8-1bn. Lupin is another filer expected to received approval for gProAir in 1HFY21.

Incremental addition is ~5-6% to FY21/22 estimates- We expect gradual ramp up as shipments are expected to be staggered. We factor sales contribution of USD60mn/70mn sales in FY21/22 respectively. Incrementally, this adds ~5-6% to our EPS estimates. Strong respiratory franchise (gAdvair filing in Q1FY21, Proventil approval), specialty portfolio targeting Institutional space (IV Tramadol, Zemdri) and complex products (40% of projects under development) will drive US growth in the medium term. We revise our target price to Rs 600 (20x FY22 EPS + Rs 30/share for gAdvair). Reiterate Buy.

Key risks- delay in resolution of Goa WL, lower-than-expected growth in India and South Africa, trade margin cap in India, higher price erosion in the US and delay in key US approvals.

Shares of CIPLA LTD. was last trading in BSE at Rs.592.55 as compared to the previous close of Rs. 592.7. The total number of shares traded during the day was 660353 in over 17855 trades.

The stock hit an intraday high of Rs. 614.05 and intraday low of 579.05. The net turnover during the day was Rs. 396944992.

Source : Equity Bulls

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